Tesco to revamp stores after fall in UK profits
Supermarket giant Tesco has announced that it will invest Â£1 billion in improving its stores as it reported full-year results in line with the latest market consensus.
The retailer posted a 5.3% increase in full-year pre-tax profit of £3.84 billion for the year to 25 February with £1.1 billion coming from its overseas supermarkets. However, there was a 1% fall in UK profits to £2.5 billion.
Like-for-like sales at Tesco’s UK operations, excluding VAT and petrol, fell 1.6% in its fourth quarter which was an improvement on trading over the Christmas period when like-for-like sales fell by 2.3%.
The company said the slowdown in sales, which was more pronounced in December and January, was partly due to a lack couponing activity at a time when the industry at large was issuing large volumes of cumulative spend coupons. Tesco said it had now implemented a "more active couponing programme" and in recent weeks has been giving out £5 vouchers for customers spending more than £40 on groceries.
Group revenue excluding VAT rose 6.8% to £64.5 billion.
Chief executive Philip Clarke said that Tesco would commit £1 billion of investment to fund a full "refresh" of its UK stores which would be given a warmer 'look and feel'. The investment will also be used to improve staffing levels and to offer better prices and extended product ranges.
The move comes as Tesco faces criticism for focusing its efforts on expansion in Asia and the US at the expense of operations in the UK.
Clarke said: "Whilst our international business is delivering excellent growth, contributing £1.1 billion of profit to the Group, we fully recognise that we need to raise our game in the UK.
"As a result, we are committing over £1 billion to make the UK shopping trip better for customers: more staff giving improved service in-store; refreshed stores that are better and easier places to shop; lower prices and even more value from an improved product range."
The company said that capital expenditure in the current financial year would total £3.3 billion down from £3.8 billion in the previous year.
Tesco’s Fresh & Easy grocery chain in the US made a full-year loss of £153 million although losses fell for the first time. The company said it had made slower progress towards breakeven than expected and now anticipates reaching this point during the 2013/14 financial year.
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